Drilling fight shows no signs of letting up

DISASTER IN THE GULFNo let-up in drilling fightEnsco suit broadens challenge of ban to include safety standards

By Jennifer A. Dlouhy |
July 13, 2010

WASHINGTON - The Obama administration may have hoped that a newly revised ban on deep-water drilling would end the legal battle over the issue, but it became clear Tuesday that the fight over offshore exploration is far from over.

Ensco Offshore Co., a U.K.-based rig owner, filed a lawsuit accusing the administration of illegally imposing new requirements on the industry and dragging its feet in permitting shallow-water drilling.

Although Ensco is arguing against the same original ban that other companies also have sued over in federal court, the company also is challenging new safety standards imposed on the industry and delays in issuing shallow-water drilling permits.

Meanwhile, Hornbeck Offshore Services, the drilling rig owner that successfully challenged the first ban in federal court, was skeptical of the new moratorium and weighing its response. A third challenge of the original ban, by Houston-based Diamond Offshore also is pending in a federal district court.

Secretary Ken Salazar issued the new directive Monday, in response to a June 22 federal court ruling that invalidated the original ban on drilling in at least 500 feet of water. Although Salazar's order was rewritten so it would apply regardless of water depth — and was accompanied by more than 20 pages of new justification - it essentially maintains the status quo in the Gulf of Mexico, where deep-water drilling has been blocked since May 27.

Administration officials moved swiftly in asking federal courts to dismiss Hornbeck's legal challenge and vacate the court order that blocked the original moratorium .

If Hornbeck and other companies want to challenge the new ban, they can file a separate case on it, said Moreno .

Hornbeck has until July 26 to respond to the government's bid to vacate the injunction. Two days later, federal district Judge Martin Feldman will hear arguments over whether he should dismiss the case.

The drilling suspension became a central issue during a second day of hearings by the national commission investigating the Deepwater Horizon disaster. In a New Orleans hotel, the panel heard from petroleum engineers and industry officials who warned that the drilling ban - along with delays for shallow-water operations - could cause widespread economic pain for a region still recovering from the Gulf Coast region.

Some predicted that economic damage from the drilling moratorium could dwarf the pain from the spill itself.

"We heard that basic message over and over again," said Commission Co-Chairman William Reilly .

The nation's new drilling regulator, Michael Bromwich, told the panel that he will hold a dozen hearings on the ban over the next two months before making recommendations to Salazar by the end of October. Salazar's new drilling suspension is now set to last until Nov. 30.

Ensco's challenge takes aim at the way the administration has imposed new requirements on drilling operations and energy companies - via "notices to lessees" effective immediately rather than a formal rulemaking process with extended public comment periods. Ensco argues that those changes - which apply to shallow-water operations and are not tied to the moratorium - were arbitrary and implemented hastily.

Although Salazar and Bromwich have emphasized that shallow-water drilling operations are not affected , industry officials complain that many applications for drilling permits are stalled.

"The reality is that permits for shallow water drilling are not proceeding despite the widespread efforts being made by the industry to honor the letter and spirit of new Interior regulatory standards," said Randy Stilley, president and CEO of Seahawk Drilling.